Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 06/5” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Growing expectations that the Fed will rescue the economy from falling into recession gave the S&P 500 index a strong boost. The index rallied after the Fed Chairman Jerome Powell signaled at a potential cut in interest rates if trade wars intensify and negatively impact the economy.
Technology stocks staged a strong rebound from Monday’s intense sell-off to lead the index higher. In its best day since January 4, 2019, the index maintained a steady stream of gains throughout the session to regain support of its key technical level of 2800 and closed at 2803.27, up a solid 58.82 points and gaining 2.14% over previous session’s close. Except the Real Estate and Utilities, all the sectors were strong gainers in today’s Fed-led relief rally.
THE DETAILS (The “How & Why”):
Fed Chairman Jerome Powell said that the central bank will monitor developments on trade front and will be open to interest rate cuts to support the economic expansion if required. Gapping higher at the open, gains accelerated following positive comments from Beijing suggesting further talks to resolve trade disputes, helping ease trade tensions.
FAANG Stocks bounced back after being brutally sold-off in previous session on concerns of regulatory and political risks on the big tech-giants. While Apple Inc. led the FAANG components with a 3.66% gain, Alphabet Inc., Amazon.com Inc. and Facebook Inc. all rose more than 1% each.
Semiconductor stocks lead the gains within the tech space. Advanced Micro Devices Inc., NVIDIA Corp. and Microchip Technology jumped 7.22%, 6.89% and 5.66%, respectively. Recovering from previous session’s slump, Technology, Consumer Discretionary and Communication Services were the strongest performing sectors, up 3.26%, 2.63% and 1.74%.
Industrials and Materials were the other strong performers, up 2.37% and 2.76% on the back of easing of trade tensions and a sliding dollar. Hopes that the tariffs on Mexican goods that are supposed to go into effect on June 10 will be avoided helped ease some trade jitters.
Meanwhile, Treasury yields snapped a five-day losing streak after Jerome Powell eased recession jitters on hinting that the central bank will support the economic expansion by cutting the benchmark interest rates. The 10-year Treasury yield settled at 2.121%. Oil prices also bounced back from a four-day decline to boost Energy stocks. Financials and Energy sectors added to the day’s gains, closing sharply higher by 2.71% and 1.61%, respectively.
Defensive sectors lagged in gains alongside stabilizing yields amid increasing risk-appetite. While Real Estate stocks shed 0.56%, Utilities closed mostly unchanged for the day.